Congress turning a D+ on infrastructure into an F

Opinion: Refusing to spend money on roads and bridges will cost jobs and prosperity

The scene of a bridge collapse on Interstate 5 near Mt. Vernon, Wash., on May 23, 2013.

WASHINGTON (MarketWatch) — Of all the dumb things done in the name of fiscal restraint over the past five years, surely the dumbest was the decision by our government to slash its investments in the future.

We know that the deplorable state of our roads, bridges, ports, airports, schools, hospitals, rail lines, levees, canals, power and communications networks, drinking water and waste systems cries out for more investment in the infrastructure that our economy depends on.

“We shouldn’t watch the top-rated airports and seaports or the fastest rail lines or fastest Internet networks get built somewhere else,” Obama said. “They need to be built right here in New York, right here in the United States. First-class infrastructure attracts first-class jobs.”

But instead of investing more, we’re doing less. Balancing budgets today has become more important than building the economy of tomorrow.

Public investments have dropped precipitously since 2009, and reached a new low in the first three months of 2014, when net investment by federal, state and local governments fell to the lowest level in 65 years, just 0.5% of gross domestic product.

I’m focusing here on net investment, rather than on the more widely reported gross investment figures, which show a robust rebound from recession lows. Why look at net instead of gross? Because we have to pay attention to the wear and tear on our existing infrastructure, which is a much bigger deal that you’d expect: Depreciation of our public infrastructure amounts to $500 billion a year. We need to invest that much just to avoid falling behind.

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Net investment by the federal government turned negative in the first quarter of 2014.

In the first three months of this year, net investment by the federal government actually turned negative, which means the infrastructure wore out faster than it was being replaced.

And it’s about to get worse. As usual in Washington these days, misguided concerns about the budget are getting in the way of solving problems we all agree must be solved. Everyone agrees that we must spend more on our transportation and other vital public utilities, but lawmakers can’t agree on how it should be paid for.

The Highway Trust Fund is a major source of funding for highway investment, but its finances are in doubt. The White House warns that a disruption in the trust fund could cost 700,000 jobs.

Raising the federal gas tax of 18.4 cents would be an obvious solution (it hasn’t been increased since 1993), but there’s little appetite in Washington for raising any tax, even one that so directly benefits the people who pay it. Instead, we’re hearing talk about new user fees, perhaps via tolls or a new vehicle fee based on miles driven.

For obvious political reasons, stealth taxes are preferred.

Meanwhile, the authorization for transportation investment expires at the end of September, and it’s uncertain what Congress will do. The issue of funding is so contentious that the leaders of the Senate Environment and Public Works Committee, California Democrat Barbara Boxer and Louisiana Republican David Vitter, have put forth a bill that doesn’t address financing at all, punting that question to the tax-writing Senate Finance Committee.

One possible solution that could break the political gridlock is for the private sector to invest in public infrastructure, either as passive investors or as more active participants. There’s even one proposal to allow multinational companies to repatriate some of the cash that’s locked up in overseas tax shelters by investing in public infrastructure bonds, similar to the successful Build America Bonds from the stimulus bill.

These ideas sound appealing, but the devil is in the details. We don’t want to give away the national patrimony.

We won’t be able to invest what we need to until we figure out the financing, but Washington seems to lose its mind whenever the subject of money comes up. That’s short-sighted, because infrastructure pays for itself over time. Unfortunately for America, time is running out.

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